Work For A Company That Is Filing For Bankruptcy? When You Should And Shouldn't Worry About Your Job
Posted on: 9 February 2016
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Quite frequently you hear about this or that national chain of stores or restaurants filing for bankruptcy. The assumption is that the company is entirely broke and everyone will be out of a job in a month. Employees begin to panic, but really there is little need to panic. In most instances, a bankruptcy can be a very good thing for a business. Here are three reasons why you shouldn't worry about your job security when you work for a business that is filing for bankruptcy.
The Type of Bankruptcy the Company Files Makes a Big Difference
There are two types of bankruptcy filings the bankruptcy attorneys can file for businesses like restaurants and retail stores. These are a Chapter 7 and a Chapter 11. With a Chapter 7, almost all of the company's debts are discharged, which means that the company you work for is attempting to get a fresh start so that it can remain in business and keep most, if not all of its current employees. A Chapter 11 can also be a good thing for your employers as it will allow them to continue daily business as usual. The bankruptcy attorney acts as a debt restructuring and settlement agent, helping the company pay off its debts and creditors slowly over time. Although there is still the remote possibility that your employers could shut down the company entirely, you can rest assured that most employers keep trying to make the business work until it absolutely cannot work anymore.
When the Owner of the Company Files for Bankruptcy
When the owner of the company files for a personal bankruptcy, then the business might be affected. This is only true when the owner holds a very large number of company shares. The shares are viewed as assets and can be sold to the highest bidder so that the money gained from the sale of the shares can pay the owner's debts. This is usually when other private or publicly traded companies seize control after buying out all of the owner's shares. (Then there is a small possibility you may lose your job because the company is under new ownership and/or new management.) When the company is also a limited partnership and the individual filing for bankruptcy stands to lose all of his or her investments and shares in the company, the remaining partners have to agree to file for bankruptcy in order to restructure the company as a whole.